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Wall Street Journal Regurgitates Misleading Government Data on Durable Goods

The Wall Street Journal today dutifully reported the Commerce Department’s seasonally adjusted data on Durable Goods orders in July, proclaiming:

U.S. Durable-Goods Orders Rebounded in July, Jumping 4.4%

However, the actual, not seasonally adjusted data tells another story. It’s easy to actual data to tell if the momentum of the business is gaining or losing ground. Just compare the year to year change for the current month with immediate past months.

The actual data showed a year to year decline of -6.4% and a month to month decline of -13.7%.

That doesn’t tell us much on a standalone basis. We need to compare that to past data to see the momentum of the business. The year to year decline of -6.4% in July was indeed a hair better than June’s drop of -6.7%. However the July drop was larger than each of the 10 months prior to June. That’s a pretty weak basis for claiming that July had an increase of 4.3%. It’s easy enough to see on a chart however.

Durable Goods Orders - Click to enlarge

Click here to view chart if reading in email. 

We also see that the July level was 1.7% below the July 2007 peak, while the June level was just 1.1% below the June 2007 peak.

This Week Will Tell If The Bear is Really Coming Out of Hibernation

Last week’s selloff did less damage than it may have felt like. The drop stopped in the area of 3 crossing uptrend lines, ranging in length from short term to long term. Here’s what would tell us whether the uptrend is still in force, or signal that something evil this way comes. I have added 8 new stocks to the swing trade chart pick list, including 2 shorts.

The June-July month to month drop of -13.7% means little on its own. A month to month decline of some magnitude is normal for July. The July month to month decline was a hair better than in July of 2015, when the drop was -14.1%. Is that a material improvement? Not compared with an 8.4% July gain in 2014. That was an outlier, but the average change in July since the recovery began in 2009 has been -10.5%. The current month was materially worse than average, 30% worse to be precise.

This data is for nominal dollar value. It does not adjust for inflation. Using the PPI for durable goods as the deflator, the big picture on a unit volume basis is a whole lot worse than the nominal data shows. Meanwhile stock prices have decoupled, particularly since 2013.

Real Durable Goods Orders and Stock Prices - Click to enlarge

Click here to view chart if reading in email. 

In terms of unit volume of orders, current levels are well below 2007 levels. Order volume has been in a downtrend for 16 years as the US persistently loses durable manufacturing sales and production to the rest of the world. There has been no secular recovery, and the cyclical recovery ended in 2013.

Follow the macro liquidity flows in the markets with the Wall Street Examiner Pro Trader reports. 


Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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